Research On Trade Policy To Reduce Carbon Leakage

The first best policy option to address carbon leakage is the pursuit of a global international agreement that imposes a similar CO2price signal to all emitters. However, it is difficult to reach such a unanimous agreement at present. So the border tax adjustments are one of the best strategies to balance home and abroad market, unilateral carbon pricing policy with anti-leakage provisions to level the playing field would be an unavoidable choice however would only be the second or third best option of international climate policy.Besides, empirical studies indicate that most of BTAs protect the international competitiveness of domestic products, but can not decrease the global emissions and welfare losses.In general, the existing literatures have not explored how a BTA influence one country to set its emission tax,under what situation the combination of BTAs and climate policy can improve the economic benefits and economic environment from the theory aspect.Besides,the pre-studies have not considered the neutral BTA's welfare effects on a country under different market structure,and the welfare effects of BTA on upstream and downstream businesses in the same industry.Therefore,this article focus on the BTA to reduce carbon leakage in an open economy.Especially consider the interrelations between home emission tax and different measures of BTAs,to find out how to achieve welfare maximization by setting appropriate BTA level.This article consists seven chapters.As a introduction, the first chapter includes the writing objective, research ideas and method, main controversial concepts,structure, innovations and areas for improvements.The second chapter is literature review, which review the main concepts of carbon leakage,the latest study of carbon leakage and emphasis on the quantitative analysis of carbon leakage, list the concept and the different measures of BTAs.There are two strands of literature debating about the pros and cons of introducing BTAs provisions in domestic climate policy to address the concerns of competitiveness and carbon leakage. One stream follows political science analysis focusing on the concerns that trade measures may not be compatible with WTO obligations, poison future climate negotiations, and harm trade relations and international relations in climate negotiations. Another stream of literature focuses on the economic analysis of competitiveness impacts, the scale and scope of carbon leakage and the effectiveness of different BTAs to restore international competitiveness and combat carbon leakage. This chapter review the basic concept of BTAs, legal analysis and implementation effects analysis of it.In the third chapter,We examine the effects of Border Tax Adjustments(BTAs) motivated by climate change policy in the framework of strategic trade and environmental policies.Uses an intra-industry trade model of oligopoly with two countries,in which firms produce homogeneous goods and the production of each firm generates across-border pollution such as green house gases. It analyzes how BTAs affect an incentive for a national government to use emission tax policy as a strategic instrument for influencing market outcome.The result suggests that border tax adjustments motivated by climate change policy can improve economic efficiency and environmental quality in spite of their protectionism motive as well as environmental objectives.Nonetheless,BTAs can improve total welfare since gains from environmental protection outweigh losses of tax burden.The fourth chapter examine the impact of introducing neutral border tax adjustments in a duopolistic setting where an import competing firm is faced with a carbon tax on their emissions. In the absence of a border tax adjustment, it is shown in the case of strategic substitutes, an optimal carbon tax will typically be set below marginal damage if there are strong competitiveness effects and positive carbon leakage, as well as concerns about the deadweight loss faced by consumers. In the case of strategic complements, the optimal carbon tax will be set above or below marginal damage, depending on the relative strengths of a positive competitiveness effect versus a deadweight loss effect. Once border tax adjustments are allowed for, the optimal carbon tax will typically be higher as carbon leakage is accounted for, but in the case of strategic substitutes, a negative competitiveness effect cannot be resolved, whereas in the case of strategic complements there will be negative carbon leakage, and a tradeoff between a positive competitiveness effect and deadweight loss effect.In fifth chapter, this article analyze BTA's welfare effect related with carbon leakage and competitiveness in energy intensive industry. Implementation of domestic climate policy presents some additional issues in the analysis of border tax adjustments when vertically-related markets can be characterized as a successive oligopoly.Specifically, an appropriate border tax adjustment will depend on the incidence of a domestic carbon tax, the nature of competition in upstream and downstream sectors, as well as the basis for assessing the trade neutrality of any border tax adjustment. If trade neutrality is defined in terms of market volume, even though carbon leakage is reduced, domestic firm competitiveness cannot be maintained. This compares to defining trade neutrality in terms of market share, which results in domestic competitiveness being maintained and global carbon emissions being reduced.The sixth chapter list the history of BTA in EU and America,compare the policy implementation in these two countries.By use of the trade data of carbon intensive products among1999-2007in EU and America,combine with the ratio of import and export,find that there is no carbon leakage between China and America trade,there is only little between China and EU trade,even so it can not be the cause for these two countries to implement the BTAs.So there would be some political economy reasons for BTAs.The last chapter summarize whole article, list the main conclusion and some policy suggestions for China, point out the future workings.